Bonuses: Are You Getting a Fair Deal?
By Elizabeth Harrin (London)
Ever wondered why we still have the gender pay gap? Well, women receive around 80 per cent less in performance related pay than their male colleagues in some of the UK’s top finance companies – and that is a large chunk of why women’s salaries differ from their male counterparts.
An inquiry into the finance sector by the U.K.’s Equality and Human Rights Commission has found that women are much worse off when it comes to receiving bonuses. The average performance related payout for female employees was just £2,875 compared to an average of £14,554 for men. It’s not simply a few highly paid men, or a skew toward women in administrative roles on low salaries, either. There was a gender pay gap for men and women in the same grade or job category – where both sexes are assumed to be doing the same actual job – in 63 per cent of cases.
Luckily for us, since its inception in 2006, the Commission has the legal right to require companies to provide evidence of the amounts they pay to staff, as well as their other working practices and policies. It’s the first time that this type of data has been gathered, and the report makes interesting reading. The Commission’s sample was relatively small – only 50 companies. But these 50 companies employ nearly 27 per cent of the 1.3 million finance sector workers in the UK. So why are women being paid less?
Starting Salaries Make a Big Impact on Future Pay Levels
The Inquiry suggests that it is about two things: recruitment patterns and babies. First, nearly all women taking up new jobs in these companies still start on lower average salaries than men. We all know that the salary you arrive on has a huge impact on your ability to get pay increases as time goes on. Starting on £10,000 less than your male counterpart means it will take you longer to get to the salary he is on, and of course his salary is increasing at the same time too. Percentage increases are based on your current salary, so a 5 per cent salary increase translates to fewer pounds (or dollars, euros, etc.) in your pocket than a 5 per cent increase on a larger salary. So getting paid less on arrival really does have a significant impact on your earning power in your subsequent career.
Second, the age profile of the finance sector is a barrier to women’s success. The study reports that an unusually high proportion of workers in the sector fall into the 25-39 age group, the age when women tend to have childcare responsibilities.
These – and no doubt other factors – have led to a sector with one of the highest overall gender pay gaps in the U.K. economy. Full time working women earn 55 per cent less annual gross salary than men. Evened out across the economy, the pay gap is only 28 per cent nationally. All working women are getting a raw deal, but women in finance are suffering much more than most.
The Need for Transparency
It’s not just the Equality and Human Rights Committee: the Treasury Committee, a Parliamentary body set up to look at finance policy and expenditure, has also started an Inquiry into women in the city. “There’s an awful lot of secrecy around pay,” said Kat Banyard, campaigns officer at the Fawcett Society, who gave evidence to the committee this month. “The only way we’re ever going to address this is by actually introducing far more transparency. We can’t know the full extent of the pay gap until all companies are required to carry out pay audits.”
Becuase pay audits are not mandatory, companies can get away with not doing detailed analysis into pay gaps. However, there are some examples of finance companies taking the lead and minimising the impact of pay inequalities. Clydesdale Bank, which provides traditional banking services to 2.7 million customers in the UK, carried out an equal pay audit last year. There were no significant pay variations at the lower end of the scale: both women and men at team leader level and below were deemed to be paid equally. However, in local leadership roles and retail management positions, there was more variation, largely due to the long service of the men at this grade. Clydesdale took steps to address the imbalance and plans to carry out the audit again next year to ensure things are still in line.
So How Can We Move Beyond the Pay Gap?
The Equality and Human Rights Commission isn’t going to stop here. It’s interesting to know that there are pay differences in performance related and basic pay, but honestly, who didn’t know that already? This Inquiry has provided more evidence than ever before, and it will become harder for companies to ignore that something needs to be done to ensure equality of pay and bonuses. The next steps for the Inquiry are to look at what that ‘something’ actually is, and to provide structured advice for companies wishing to do more to address the gap.
“I’m encouraged by the firms which are developing transparent pay policies and flexible approaches to work,” said Trevor Phillips, Chair of the Commission. “But there aren’t enough of them. The many need to learn from the few. At a time when shareholders have become alert to the dangers of ‘groupthink’ and potential employees and customers value transparency and fair treatment it’s clear the enlightened few have a competitive advantage.”
